What if everything we know about organizational design is becoming obsolete?

It’s a provocative question, and one worth considering. Technological innovations have changed our tools and how we communicate, but most organizational structures and practices remain the same.

In today’s world, a work environment that accelerates on-the-job learning is increasingly important. Organizations should take a holistic look at their work environments—including physical space, virtual interactions, and management systems. Why a holistic approach? Bolt-on talent solutions such as leadership development, training, and performance incentive programs have done little to change the 75% decline in return on assets (ROA) since 1965 for US public companies.

The physical space is often the first thing we associate with the work environment. It includes the buildings, floors, walls, and halls where many workers spend their days. These spaces can be designed to encourage chance encounters and to facilitate collaboration and knowledge sharing from them. On its construction sites, DPR Construction connects 10–40 mobile trailers to form a single “Bigroom” where engineers and subcontractors hold meetings but also interact on an informal basis.

The digital space where virtual interactions occur—facilitated by tools used to share information, improve performance, and increase transparency amongst workers (and potentially customers)—is equally important. At LiveOps, a cloud-based customer service center, a dashboard displaying real-time performance data provides each agent with visibility into the metrics that drive business results.

The final component of the work environment is the management systems. They have the biggest impact on on-the-job learning because they are the glue that holds the organization together, creating alignment and accountability among multiple moving parts: workers, roles, and processes. Most of today’s management systems are still top-down, pyramid-shaped organizational charts, but some organizations, particularly those in fast-paced environments, are exploring new models that overcome the rigidity and drawn-out decision rights inherent in large institutions.

Holacracy is designed explicitly to try to solve the problems created by the standard management system. In December 2013, we attended a 4-hour workshop led by Holacracy founder Brian Robertson that included two action-packed meeting simulations meant to provide a taste of Holacracy in-action.

At its core, Holacracy aims to solve the organizational issues that arise from lack of clarity. The extensive Holacracy Constitution lays out the rules for the game. However, in Holacracy, no ultimate ruler (CEO) exists, and neither do job titles. Holacracy decouples roles—the work that needs to get done—from people, and power is distributed across the roles.

The purpose is to focus individuals on the work rather than the politics. By distributing power to each role, Holacracy directs the organization away from group and consensus-driven decision-making. Ultimately, Holacracy aims to shift the focus from climbing the corporate ladder to achieving goals related to the organization’s purpose.

Holacracy is made up of three primary elements:

Organizational structure—organizes work, not people. Work is defined by roles, and similar roles are organized into circles. People are free agents, able to select their own roles, and therefore, may exist in more than one circle.

Governance—meeting process used to make decisions about roles and accountabilities, distribute authority, and address any governance-related “tensions.” Robertson referred to this as working “on” the organization.

Operations—meeting process used to sync-up on status, key metrics, and triage concerns, and address any operational “tensions.” Robertson referred to this as working “in” the organization.

Operations and governance meetings are highly structured, and therefore, require a well-trained, experienced facilitator. Each circle—consisting of related roles defined and organized by the organization—conducts its own operations and governance meetings, and all workers with roles within that circle attend each meeting.

Processing tensions, defined as the gap between what is and what could be, are central to Holacracy. The OS formulates a clear process to raise and resolve any questions about operations and ownership. Resolving tensions in a clearly defined way—in the operations and governance meetings—leads to clarity among individual players

You might wonder: Who develops and executes the typical HR programs such as compensation, recruiting, performance management, and training that run an organization? Holacracy doesn’t address the philosophies and processes that guide these activities, which are, after all, just roles. If there’s confusion about roles, Holacracy provides an answer: bring it up in the next governance meeting.

There’s a seeming contradiction in Holacracy as a management system. One might expect that a system without job titles might be inefficient and create less clarity. In practice, though, Holacracy seems quite the opposite. The highly structured meetings, enabling technology (GlassFrog), and decision-making processes make internal operations, roles, and objectives clear—so individuals can innovate to solve the ambiguous problems impacting external customers and market share.

To date, over 100 organizations have adopted Holacracy, most recently, Zappos—a 1,500 person digital shoe and clothing store owned by Amazon. If successful, Zappos may prompt other companies to think critically about transforming decades-old management systems.

Holacracy isn’t the answer for every organization. What’s apparent, though, is that given the challenges for managing in today’s uncertain business environment, now is the time to question the status quo and redesign your work environment—the holistic work environment—with intent.

What can you do as an HR, Learning, or Organizational Effectiveness practitioner? Think about which teams and functions within your company are most disrupted by rapid technological advancements and globalization. Ask yourself whether the management systems and practices that guide day-to-day operations are encouraging the speed and scale of learning required to stay ahead of the competition.

In times of uncertainty and rapid change, a work environment designed to help you learn faster than the competition may be your only sustainable competitive advantage.

To learn more about the Deloitte LLP Center for the Edge and our approach to holistic work environment redesign, contact Blythe Aronowitz, Chief of Staff at the Center. To learn more about Holacracy, visit Holacracy.org.

Matt Frost is a consultant in Deloitte Consulting LLP’s Human Capital practice and a current Deloitte Center for the Edge Research Fellow. He works with clients to align talent strategies and initiatives with overall business priorities. At the Deloitte Center for the Edge, Matt’s research focuses on how institutions can accelerate learning and performance improvement in the 21st century.

Emily Selvin is a consultant in Deloitte Consulting LLP’s Human Capital practice and a current Deloitte Center for the Edge Research Fellow. At the Center for the Edge, she is contributing to research on work environment redesign and scaling edges.

As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.